Israel has rebuffed a plea from the US to stop all building in Jewish settlements in the occupied West Bank.
US Secretary of State Hillary Clinton had said her government wants Israel to stop expanding Jewish settlements on occupied Palestinian territory, without exception.
However, 'normal life' will be allowed in settlements in the occupied West Bank, Israeli government spokesman Mark Regev said - using a euphemism for continuing construction.
Mrs Clinton made her remarks ahead of a visit by the Palestinian President, Mahmoud Abbas, to the White House.
President Obama said he was confident that Israel would recognize that a two-state solution was in the interests of its security.
Mr Obama spoke to reporters after a meeting with visiting Palestinian President Mahmoud Abbas.
Earlier, Israeli government spokesman Mark Regev reaffirmed a commitment to permit some expansion.
‘Israel ... will abide by its commitments not to build new settlements and to dismantle unauthorised outposts,’ he said.
‘As to existing settlements, their fate will be determined in final status negotiations between Israel and the Palestinians. In the interim period, normal life must be allowed to continue in these communities’.
Earlier this month, US President Barack Obama told Israeli Prime Minister Benjamin Netanyahu that settlements had to be stopped.
President Obama has already called for a Palestinian state.
Mrs Clinton's remarks will be seen as another US challenge to the Israeli prime minister, who told his cabinet on Sunday he did not intend to build new settlements but that 'it makes no sense to ask us not to answer to the needs of natural growth and to stop all construction.'
